WTO sides with U.S. in auto trade dispute with China

GENEVA—The United States has scored a victory before the World Trade Organization (WTO) in a case that challenged China’s imposition of penalty tariffs on the sale of US$5 billion in American-made vehicles in China.

A WTO panel ruled late last week that China’s tariffs violated international trade rules.

The ruling came during a week when the U.S. Justice Department charged five Chinese military officers with hacking into U.S. companies’ computer systems to steal trade secrets.

The two developments pointed to intensifying trade tensions between the world’s two biggest economies.

The dispute panel for the Geneva-based WTO said China had acted “inconsistently” in imposing the anti-dumping requirements in violation of its WTO commitments.

U.S. officials said China withdrew the higher tariffs in December in response to indications that it would lose the WTO case.

Officials said they pushed forward with the case to establish the precedent that China’s actions violated global trade rules.

The WTO allows countries to raise import duties to offset improper subsidies and dumping.

But the complaint the Obama administration filed in 2012 accused Beijing of improperly imposing the anti-dumping duties.

The administration contended that China’s tariffs were imposed in retaliation for penalty tariffs the administration had levied on Chinese-made tires.

China had defended the duties on U.S.-made vehicles as legal under international rules.

It asserted that the administration’s bailouts of General Motors Co. (GM) and Chrysler Group amounted to unfair government subsidies.

China’s duties affected cars and SUVs with engine capacities of 2.5 litres or larger.

U.S. Trade representative Michael Froman said the WTO ruling would benefit America’s nearly 850,000 auto workers.

China has become America’s second-largest auto export market.

In 2013, the U.S. exported US$64.9 billion worth of autos, with US$8.5 billion of that total going to China.

Froman said the penalty duties, ranging up to 21.5 per cent, hit US$5.1 billion of America’s auto exports to China last year.

The penalties covered such popular models as the Jeep Grand Cherokee, Cadillac Escalade and Buick Enclave.

“This is the third time that the United States has prevailed in a WTO dispute challenging China’s unjustified trade remedies,” Froman told reporters in Washington.

The two other disputes involved U.S. specialty steel products and chicken broiler parts.

The Obama administration has been more aggressive in filing WTO cases against China than the Bush administration was and has stepped up pressure in other areas of trade.

The U.S. trade gap with China, which is at a record high, is its largest with any country.

Besides the indictment of five Chinese officials on hacking charges, Treasury Secretary Jacob Lew flew to Beijing last week for talks that covered U.S. concerns that China’s currency has been falling in value this year.

American manufacturers contend that China’s renminbi is as much as 40 per cent undervalued against the dollar, giving Chinese companies an unfair trade advantage.

Rep. Sander Levin (D-Michigan) said the WTO ruling was a “significant victory in the fight against China’s practice of retaliating and intimidating those who dare to stand up to it.”

Still pending before the WTO is a second auto case the U.S. government filed in 2012.

It challenges export subsidies that China provides for its own car and auto parts manufacturers.

U.S. officials said discussions with China were still ongoing in that case.

Under WTO rules, both countries must try to resolve the trade dispute through negotiations before a WTO panel convenes to hear the case.